Bakers, Soft Drink Makers Decry Increasing Sugar Prices

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Sectors that use sugar as one of the key ingridients are in the red, following a surge of about 30 per cent in the prices of the sweetener. Sugar prices have been gradually going up since September, with a 50-kg bag now going for Rwf45,000 at depots, driven by huge shortages on the local, regional and international markets. Appolonia uwanziga examines the impact of the rise on local industries, especially bread makers and soft drink companies.

Gatabazi went to buy his favourite juice (Agashya) over the weekend and he was surprised to find the price had shot to Rwf4,000 a litre. The neighbourhood dealer had no clear explanation, only saying the wholesale price had gone up so he had to raise the retail price to make a profit.

Do not be surprised if you find the price of your favourite bread has shot up. Like juice and other soft drinks made using sugar, bread prices will go up any time, according to traders, because of the recent rise in sugar prices in the country. Sugar now costs Rwf1,000 per kilo in shops and supermarkets, up from Rwf800 at the end of October. This is an increase of Rwf200 or about 30 per cent, according to Augustine Shema, the chairman of the Bread Manufacturers Association.

Shema said the price of sugar has risen from Rwf35,000 per 50-kg bag in September to Rwf45,000 (as of last Saturday).

He said though the government scrapped taxes on sugar imports, the waiver has not helped the situation, noting sugar from the East African Community (EAC) is expensive. This has forced most importers to buy sugar from as far as Zambia and Malawi, and even Asia and the Americas.

"Sugar is more expensive in Uganda compared to Rwanda, so importers prefer to buy from Zambia or Malawi," he said in an interview with Business Times over the weekend. Rwanda consumes over 100,000 tonnes of sugar per annum, most of which is imported.

He said the association was going to engage the Private Sector Federation for answers on what is going on. The group is expected hold an emergency meeting, where Shema said they will discuss the next move, especially approving the proposed price hike. They will also approve documents to PSF and government, seeking an explanation and expressing their grievances about the situation.

The group meets next week agree on the proposed new rates the chairman did not reveal. However, the price increase will affect only bread brands that are baked using sugar, while brands made using salt will not be affected, Shema explained.

Job loss fears

The bakers' association is worried the increase in sugar prices could continue, which will hurt the sector and put some jobs on the line as firms try drastic measures to stay afloat.

"If you were using 50 bags of sugar a day, that is likely to drop to about 40 bags of sugar, meaning reduced production that will force some factories to cut jobs.Besides people who have been buying say two loaves of bread will now most likely start using one loaf, while others will suspend bread on their daily menu," Shema said.

He added this will affect the bread industry, as well as government through reduced revenues as firms cut production.

"Power charges are too high for bread manufacturers... this has now compounded the problems to bread manufacturers and other industries that use sugar as a raw material,"Shema said.

According to Eric Stam, the executive secretary at Kacyiru-based Esther's Aid, which makes bread and cakes, the high costs of sugar is choking the bread industry.

"Sugar is a major ingredient in bread baking, but the price has shot up and we cannot make profits because we are spending a lot of money on sugar," Stam told Business Times in a telephone interview.

He added this has increased the cost of doing business, saying bakers may soon increase the cost of bread and confectionery products to offset some of the expenses.

"We don't want to hurt customers because we know that when the wholesale price is high, the retail price will rise, too, and affect demand and our earnings," Stam added.

Soft drink makers speak out

According to Gerald Sina, the managing director for Urwibutso Enterprise, commonly known as Nyirangarama, based in Rulindo District, said the firm has already decided to raise the prices of its juices as a result increase of sugar prices.

"A litre of Agashya juice that was at Rwf3,800 previously now goes for Rwf4,000," Sina said. He added that buyers have reduced, saying this will hurt their projections for the year. The firm, which also makes bread and other confectionery products, will soon increase the prices of products, if they are to stay in business.

According to Adan Ramata, the Nakumatt Rwanda's country manager, the high price of sugar is affecting the prices of other products.

He added that, the sugar price in Nakumatt is Rwf1,200 per kilogramme, up from Rwf1,000 previously.

"If prices continue increasing, I am sure prices of most of the products made using sugar as an ingredient, like cakes, juices and bread, will go up," Ramata said.

Damas Mugiraneza, a trader in Nyarugenge District, said he bought 100 bags of sugar at Rwf44,000 each last week, an increase from Rwf38,000 previously.

"So, I had to raise the price of a kilo of sugar to Rwf1,000. However, there are very few customers," Mugiraneza said.

Placide Ndekwe, a Kigali-based sugar importer, said a 50-kg bag of sugar from Brazil costs Rwf39,000, while that for Kabuye is at Rwf38,200 on wholesale.

Ndekwe attributed the rise in prices to low supply from the region, and disruption in key sugar producing countries like Brazil, as well as increasing global demand.

Aline Uwamwiza, a Kigali resident, says she now buys half kilo of sugar and uses it sparingly. Uwamwiza says low income-earners will be worst affected by the increase in sugar prices.

"I used to buy a kilogramme of sugar at Rwf700, over the weekend I found it had increased to Rwf1, 000. I have decided to reduce on amount of sugar we use at home, reserving it for mainly children until the prices go down," Uwamwiza said.

Kabuye Sugar explains the shortage

Thiru Navukkarasu, the general manager Kabuye Sugar Works, said the prolonged drought that hit the country this year affected their sugarcane plantations, leading to low cane being crushed. "Most of the cane was damaged, which affected our production capacity per tonnage of cane," Navukkarasu explained.

He added that Rwanda imports sugar from Brazil, Thailand, India and EAC countries, but said there is shortage.

"Rwanda imports sugar from the EAC bloc and countries, like Brazil. However, this year there is a shortage of sugar in Brazil, pushing up international sugar prices.

"Tanzania, Uganda and Kenya are also facing shortages. So, these rises are invertible since the challenge is widespread across the region and other markets," Navukkarasu said.

He said the factory price is Rwf38,200 per 50-kg bag of sugar, while in Uganda it is at Ugsh170,000 (about Rwf40,800). He added that the current situation is reminiscent of the same period in 2011, when sugar prices rose to Rwf1,100 per kilogramme and only declined after the cost of the sweetener eased on the international market.

Scaling up dwindling production capacity

Navukkarasu said the factory's cane yield per hectare last year was 85 tonnes, but has dropped to around 75 tonnes per hectare this year, while the harvestable area is 2,000 hectares.

He said, through an ongoing Dutch project called Sugar Make it Work, the firm was able to reclaim additional marshland for cane cultivation that has improved sugar production from 11,000 tonnes to 13,000 tonnes

He noted that Kabuye has drafted an expansion plan that they have submitted to Rwanda Development Board, where they target to produce over 50,000 tonnes per year. "If that plan is approved and we get more land to expand cane growing, Kabuye is ready to produce 50 per cent of the country sugar needs," he said.

He added that the firm would also start an irrigation scheme to reverse the effects of long dry spells.

What government says

Minister of Trade, Industry and East African Community Affairs, Francois Kanimba, said the country is experiencing a shortfall in sugar output and supply.

Kanimba said Rwanda imports about 90,000 tonnes of sugar annually to meet demand of 100,000 tonnes. The current sugar import bill is about $45 millions, according to him.

He said Rwanda plans to build another factory in Ndego sector in Kayonza District that will help make the country self-reliant in sugar production.

"Kabuye produces about 10,000 tonnes of sugar, but the new plant to set up a Mauritius company will have the capacity to produce 100,000 tonnes of sugar per year," Kanimba told Business Times in a telephone interview on Friday.

The minister said the country sugar demand is estimated at 160,000 tonnes by 2020.